Hi. My question is why finance cost (interest payable on the lease) is not a current liability according to the answer. Thank you
On 1 January 20X6 Fellini Co hired a machine under a four year lease. A deposit of $700,000 was payable on
the commencement of the lease on 1 January 20X6. The present value of the future lease payments was
$1,871,100. A further 3 instalments of $700,000 are payable annually in advance. The interest rate implicit in
the lease is 6%.
What amount will appear under non-current liabilities in respect of this lease in the statement of financial
position of Fellini Co at 31 December 20X6? [Answers to nearest $'000]
Answer:
Current 700,000
Non-current 1,283,366
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Leases
4y ago#1Hi,
I suppose technically the payment of $700,000 being made next year will pay off the interest that has been accrued first in the current year, so there would be an interest payable balance.
Thanks
Hi, in the Open Tuition Notes on the Lesse accounting question, the Indirect cost and the Incentive has not been considered in the Right to use asset and the Lease liability whereas in the Illustration it was considered, also in the notes, it was mentioned that the initial measurement will consider all the costs and incentives but the same hasn't been done in that example. Can you please help me with that?
4y ago#3Hi,
Are you sure it hasn't been accounted for? I think if you look at the answer and the journal entries then I believe that these costs have been included within the right of use asset.
Thank
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